Simone Valente :
022_DP38 Endogenous Growth, Tax Policy and Human Capital Formation
JEL Classification:
E62, O41, O11
Abstract:
We study the effects of public investments in education financed
through proportional taxes in a model with overlapping generations.
Studying-time and educational expenditures increase labor efficiency, generating a trade off between human and physical capital at the aggregate level. We describe the reactions of the labor supply to prospective tax rates, and we compare private and public education regimes. Under the optimal policy, public education is plausibly growth-improving,
but welfare gains are unevenly distributed among generations due to high taxation in the first period of life. Under an alternative, non-optimal policy that shifts the tax burden onto the second period of life,
public education is unambiguously growth-improving with respect to
the private system, and welfare gains are distributed more equally
among generations.
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